Most people think being in debt is a bad thing when it actually doesn’t have to be. The reason why debt can become a bad thing for people is that they do not know how to manage their debt properly. Acquiring a loan or a line of credit can help you to reach your goals faster. By showing banks and lenders that you consistently pay your bills each month, you build up a credit score.
Depending on what you want regarding taxes and your liability, these different types of businesses have pros and cons to them.
- Sole-Proprietorship is the simplest business type that exists. The advantage of this type is that you, as the sole-proprietor, are in business for your own benefit. The disadvantage of it is that the liability is completely on you
- Partnership-General and Limited are both mutually agreed-upon ventures between two or more people. All partners equally share profits, expenses, and responsibilities. A general partnership is when the partners are equally and personally liable for all losses or damages from the agreement. A limited partnership is where the partners are only personally liable for the portion they originally invested in the business
- A Limited Liability Company or LLC is a blend of a partnership and a corporation. Parties of an LLC are not completely responsible for loss or damages incurred by the business. They also have operational flexibility within the business. Profits are shared similarly to a partnership. There are differences between an LLC and a partnership in legal terms
- A corporation is a separate entity from the owner(s). There are two types of corporations, a C-Corporation, and an S-Corporation. Both must have Articles of Incorporation filed for the state
It is best to do your own research and seek advice from an attorney regarding which business type will be the best fit for you. Click here for more on C corp vs S corp.
The C corporation is a traditional corporation that also has double taxation. First, the company pays taxes on sales, and then they must pay taxes on the stockholder’s dividends.
An S corporation is different. They must meet member requirements, and they are not obligated to double taxation. The IRS waives the traditional corporation taxes.
Reaching Your Goals Faster
If you have the long-term goal of entrepreneurship, there are things to do in preparation for your business launch. Start-up costs are sometimes the biggest obstacle to entrepreneurship. You might be considering taking out a loan to fund your business. Your previous credit behaviors are recorded and then used to determine the terms of the loan they are willing to offer you.
Most businesses need a lot of money early on to start. You have to spend money to make money. There are different business types you can create, which all have certain advantages and disadvantages.
How Debt Can Ruin a Person’s Business
Irresponsibility can lead to large amounts of debt. It is important to maintain consistency by paying all expenses on time. In business, too much debt can happen very easily.
If the business does not bring in the needed revenue to pay all of their expenses, the owners can find themselves overwhelmed. Overestimating their own capabilities can lead to their downfall if they are not careful.
Personally or Professionally Speaking…
One can find themselves in over their head due to the accumulation of debt with their personal finances or their business. However, there is hope for those that have the misfortune of accumulating too much debt. Here is a short article with some useful tips to overcome large amounts of debt.
Unexpected expenses come up, or we forget a payment here or there. After all, we are human and are not perfect. Getting caught up might not be as hard as you think. You may have debt collection agencies calling to try to recover the money you owe. This is part of the debt recovery process. Here is a useful article to learn more about debt recovery.
You can research debt solutions on your own. Seeking financial help is not a bad idea either. Recovering from too much debt is possible. Sometimes you just have some changes to make in your financial habits.